Guest Post by Jon Elder of Black Label Advisor
Photo by Erica Nilsson
Let’s be honest. Selling on Amazon as a private label seller is no fantasy. Those that say, “it’s so easy,” “there’s profit everywhere” and “anyone can do it” aren’t telling the whole truth. The harsh reality is that over 85% of sellers fail on Amazon. Many of the “gurus” pitching these fantasies fail to share the “good stuff” or take time to coach new sellers on what to avoid on Amazon.
The road to successful selling on Amazon can be full of potholes, but if you are educated from the get-go your chances of success go up dramatically.
Here are ten common Amazon pitfalls and how to avoid them for good.
#1: Copying Other Sellers
This happens way too often. A seller sees a nice revenue spread in a certain category, so they decide to launch their version of a product but only change the color. Every other feature is the same as the other existing sellers. Anyone can do this. This is not a successful long-term strategy. It’s only a matter of time before you are being copied yourself and watch as your revenue plummets.
Take a long, hard look in the mirror and repeat these words “I will not copy my competition.” Do your research and differentiate yourself from the competition. Make improvements. Offer more features. Create a compelling bundle. Make your product stand out.
#2: Lack of Net Profit Analysis
All too often, sellers assume that great product design and revenue potential will lead to success. Wrong! A detailed net profit analysis must be done before you reach out to manufacturers. It’s painful to go down a rabbit hole and then realize that your product idea has no profit.
Properly calculate your net profit. Here’s a simple calculation:
Net Profit = Target Selling Price – (Cost of Goods + Shipping Cost per Unit + FBA fees + Average PPC Costs)
Run every product idea through this simple calculation to make sure you are targeting products with a net profit of 25% or greater.
#3: Fear of PPC
Amazon SEO is very important, but you can’t only rely on organic traffic if you want to compete with the top sellers. Amazon is a pay-for-play environment. Its algorithm takes your Sponsored Products PPC advertising expenditure into account and has a dramatic effect on search traffic to your listing. Don’t make the mistake of ignoring PPC simply because you don’t want to spend the extra money.
If you want to compete for the top, PPC should be one of your largest business expenses year after year.
#4: Ignoring Inventory Planning
One of the most catastrophic things that can happen to your Amazon business is running out of stock. When this happens not only do you lose out on sales but with each passing minute, you also damage your search algorithm score with Amazon. Amazon hates it when sellers run out of stock! They want their customers to be able to purchase your products 365 days a year with zero exceptions.
Planning your inventory ensures you have stock arriving on a bi-monthly basis (or when needed) and don’t ship too many units and incur long-term storage fees. Knowing your average daily and weekly sell-through rate is important for calculating purchase orders. A little analysis goes a long way to never running out of stock again.
#5: Forgetting About Branding
You should always be thinking about your branding message and never let it go. Every business decision should be filtered through your brand strategy. Good branding can set you apart from the competition. It creates a memorable impression and tells customers what to expect from your company and products.
I ran one of the most successful outdoor toy lines on Amazon. My brand mission statement was to help kids rediscover the fun of the great outdoors. Every picture, video, and all of my written copy was tied to this idea. Do the same with your brand. A consistent message goes a long way.
#6: Not Launching New Products Fast Enough
A few winning product ideas are never enough. On Amazon, there is a sea of competition on your heels waiting to take you out. Never assume your current winning products will be winners tomorrow.
The key is to always be developing new and fresh revenue streams. When one dips in sales another takes its place. Continually launch new product lines and expand on variations of your existing listings. Create diversification through variety. This is also what private buyers want to see when considering a business to buy, so it’s important to make this a priority from day one.
#7: Underutilizing Cheap Capital
I see many sellers stall when it comes to growth and I ask “have you considered loans or credit lines?” The answer is often: “No, of course not! I don’t want debt!” I then remind them that many top-tier companies have immense levels of debt. Take Tesla for example!
Smart debt is part of doing business and expanding your brands on Amazon. Focus on low-interest rate loans and using only what you need. A little bit of capital can catapult your business to year-over-year growth in very little time.
#8: Not Innovating Existing Products
Sitting back and calling it a day with winning products is a terrible strategy. Your product should never be “good enough” – especially when the competition is knocking at your door.
Over time you will receive negative reviews. Utilize this information, a.k.a customer feedback, to make your product better. Can you improve one of the functions? Is a redesign needed? Maybe upgraded materials are called for? It could be a whole host of things, but the goal is to never sit on your butt and be complacent. There are hundreds of thousands of other sellers who are hungry for profits. You can be out-innovated. Don’t let it happen.
#9: No Intellectual Property Protection
Ignoring the amazing power of intellectual property protection can destroy your brand overnight. Make trademarks and design patents a high priority in your business.
Don’t assume the world around you is nice. It’s brutal out there and people play dirty. Protect yourself from day one and ensure your brand is untouchable.
#10: Waiting Too Long to Outsource
Trying to do it all is a loser’s game. Be smart about outsourcing and start off-loading tasks as soon as you can. PPC management, accounting, customer service, returns, Amazon reviews, and logistics are all things you should hire for or outsource. Your time is better spent on product innovation and launching new products and brands. Let the pros take care of these tasks and allow yourself to focus on the core of your business.
Hi, I’m Jon and I’m a big believer in the power of education. Seeing people thrive on Amazon is truly my passion.
It’s no secret that Amazon is hard, really hard, but proper Amazon education can help you avoid the various pitfalls that exist in the marketplace.
Wishing you much success,
Jon Elder, Black Label Advisor
ABOUT THE AUTHOR
Jon runs Black Label Advisor, an exclusive consulting firm focused on helping private label sellers expand their brand on Amazon and other e-commerce platforms. Whether it is listing optimization, cleaning up financials for an exit, or discussing brand strategy, Jon provides value and expertise to private label sellers.
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